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Executive Hire Forum: WOLSELEY SPEEDS IN FOR BRANDON AND DRIVES INTO THIRD PLACE As EHN goes to press, we are witnessing a substantial shift in the positions of the leading companies in our market with the breaking news that Wolseley has reached agreement with the Brandon directors to pay £71.9m cash for the UK’s fourth largest tool hirer. The Brandon board holds some 8.5m shares (25.1% of the issued capital), including Chairman John Laycock’s 8,000,000 stake. A counter-bid does not seem likely and the deal should clear all the formalities to make Wolseley into the third largest player in the market. The rumours that Speedy was out of the running and Wolseley was in pole position had grown increasingly strong in the days before confirmation came on 28 March. Since last December’s announcement that Chief Executive Charles Skinner and Finance Director Chris Sims had been given permission by their fellow directors to attempt a Management Buy Out at Brandon, there seemed every prospect that such a deal was likely to be eclipsed by a straight acquisition by a competitor. Although the early favourite was Speedy, especially after it accumulated just over 500,000 Brandon shares through a series of purchases, it was clear that, if Wolseley wanted to make a serious play for Brandon, it would be well placed. The final price of 212p per share is pitched at a level which is a premium of over 38% to the closing share price on the last business day before the announcement of a possible MBO and represents an exit price earnings ratio of about 18. The £71.9m consideration compares with Brandon’s £24.6m of net shareholders’ funds at 31 December 2005. One of the probable reasons for Speedy’s reluctance to go the whole way is that such a bid would have significant goodwill implications for its balance sheet. As it is, Speedy is able to walk away with a substantial profit on its investment. This deal is undoubtedly of major significance for the market. It has been apparent for some time that Wolseley was looking to make a bigger impact in tool hire, but it is thought it walked away from some opportunities and had seemed to be content with building up its Hire Center business, which we rated as the eighth largest player in the EHN Tool Hire Top Ten (January 2006 issue) with a turnover of £33m. Brandon’s turnover in 2005 reached £57m and analysts’ estimates are for approximately £62m this year. These figures indicate that the combined Brandon and Wolseley tool hire interests are set overtake Hewden to become No.3 in the market. The move looks to be highly positive from Brandon’s point of view. Its shareholders have done very well, but so have its management and staff as Wolseley intends to retain the Bristol base and all 143 Brandon locations. The Hire Center operation currently has 135 branches. Chris Sims, who is to remain with the company, describes it as “a very good deal” and adds that the Brandon management “is very keen to make sure that Wolseley’s aspirations for the company are exceeded.” Charles Skinner will stay until the handover period is completed. On the announcement of the bid, Wolseley UK Managing Director Adrian Barden described Brandon as “a very healthy business with a strong management team and impressive performance in the market” and went on to say that Wolseley regarded tool hire as “a strong growth area” and that the combination of Brandon and Hire Center will “provide a great platform to build market share, as demand for outsourcing construction equipment ownership, maintenance and delivery increases.” Executive Hire News › Archives › April 2006 › Executive Hire Forum › Wolseley speeds in for Brandon...
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